SpaceX Stock Is 169% Overvalued According to Experts. Here's Why.

SpaceX (NASDAQ: SPCX) officially priced its IPO at $135 per share. Very quickly, however, the stock's valuation soared to $225 per share. Even following a sharp correction, shares still trade around $170 per share -- well above the IPO price just a few weeks prior.

A report from research firm Morningstar, however, is pumping the brakes. The firm believes SpaceX to be worth just $63 per share -- nearly two-thirds less than the prevailing stock price.

Is SpaceX stock really 169% overvalued? Let's take a look at Morningstar's arguments.

Here's why SpaceX stock may be overvalued

Morningstar's research team clearly took a very close look at SpaceX's IPO prospectus. That 370 page document lays out the company's plans for growth, as well as its updated financial situation.

There are many factors driving SpaceX's stock price right now. But one of the biggest is the company's claimed total addressable market, or TAM. This measures the expected value of SpaceX's end markets over the long term. In a nutshell, it paints a picture of how big SpaceX could eventually become in the years and decades to come.

"We believe we have identified the largest actionable total addressable market in human history," SpaceX claims. "We estimate that our quantifiable TAM is $28.5 trillion."

With a market cap of around $2 trillion, there seems to be plenty of room left for SpaceX to grow. But Morningstar's analysts aren't buying it.

"Our valuation is the result of mathematics more than skepticism," the firm's report stresses. "Even at $63 per share, we give SpaceX a lot of benefit of the doubt in two of the three scenarios, in which we assume the company can achieve a rapidly reusable Starship rocket enabling multiple launches per week and successfully commercialize data centers in space. Neither of these engineering problems has been solved, and we don't expect them to be until at least 2028."

Image source: Getty Images.

This all gets to the crux of Morningstar's argument. The firm likes SpaceX as a business. But even assuming the company executes on several moonshot growth initiatives, the numbers still don't add up.

"In our most optimistic 'moonshot' scenario, the company would be worth $1.97 trillion, or $154 a share," Morningstar concludes. So even when factoring in total success, SpaceX's current stock price is still above the company's estimated valuation.

It is still possible to pay too much for an otherwise attractive business. And from my perspective, Morningstar's claims have some value. Investors should remember that, even if they love SpaceX as a business, the numbers still need to make sense to warrant an investment.

Ryan Vanzo has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.